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How Many Small Businesses Are In The U.S.?

Small businesses outweigh large ones and provide a considerable proportion of jobs. Is small business the backbone of our economy, as a result of this?

Romi Levine
Romi Levine
May 25, 2022

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17 Important Small Business Statistics To Know

You've probably heard the phrase "small businesses are America's backbone". But what exactly does that phrase mean?

The recent improvement of the U.S. economy has created several chances for entrepreneurs. Especially with the number of small firms in the U.S. increasing at such a rapid pace.

Even if you operate a small business, it can be difficult to appreciate how essential small businesses are. Or how much they contribute to the economy. Especially when the press concentrates on the country's largest corporations.

But keep in mind that statistics should always be taken with a grain of salt. Understand which source the data is drawn from when the data was created. And their definition of a small business. 

This varies based on who puts together the research. Regardless of whatever statistic you're studying. Regardless of how the figures are spliced it is evident that small business is critical to a healthy economy. 

Small businesses outweigh large ones and provide a considerable proportion of jobs. Is small business the backbone of our economy, as a result of this? We hope you can now make your own decision.

“Even if you operate a small business, it can be difficult to appreciate how essential small businesses are. Or how much they contribute to the economy”

How Many People Do Small Businesses In The U.S.?

There are 30.2 million small enterprises in the United States accounting for 99.9 percent of all firms. 

This is also indicative of persistent growth since it represents a 3.15 percent raise over the previous year and a 7.09 percent gain for the three years from 2017 to 2020.

As a side note, we obtained this information from the SBA Office of Advocacy which defines a small business as employing less than 500 people. 

When someone says these requirements cover "small business" you would not think of many startups, hedge funds, legal firms and other companies. 

What Industries Have The Most Small Businesses?

According to the SBA, the industry of "Other Services" has the smallest companies with 4,375,795 enterprises.

Following other services these three industries with the greatest number of small enterprises are professional construction at 3,098,210 firms, scientific/technical services at 4,207,592 firms and rental/real estate/leasing 2,925,953 firms.

How Educated Are Small Business Owners?

According to a 2016, Kauffman Index research most small company owners had a college degree. 38.71% of test takers to be exact. 

The remaining 26.51% of subjects have "some college" education. Individuals with a high school education make up 26.05% of the population. While those without a high school diploma make up 8.73%.

To collect data for the Kauffman Index researchers employed a representative sample of about 900,000 replies. 

They define "Main Street, Small Enterprises" as those that have been in operation for more than 5 years and have less than 50 workers. This differs from the definition of small business provided by the SBA Office of Advocacy.

“New small enterprises are the primary source of employment creation”

What Percentage Of New Jobs Comes From Small Businesses?

Almost all net new job growth is attributed to new firms. New small enterprises are the primary source of employment creation. 

Overall net new job growth is accounted for by new firms. And new enterprises account for nearly 20% of gross employment creation.

Small enterprises that are 5 years or older on the other hand have no meaningful influence on job growth. 

Even though most small firms employ less than 100 people they are responsible for millions of new employment generated in recent years.

In reality, there are currently 60.6 million small company employees in the United States accounting for 47.1 percent of the total workforce.

In 2019, 1.6 million new employment opportunities were created by small enterprises in the United States. Most of them were created by businesses with fewer than 20 employees who created 1.1 million new employment opportunities. 

In other words, more than one out of every three jobs available are for small enterprises with 19 or fewer people.

Where Are The Most Businesses Started?

That depends on the parts of the country you're interested in. Small company employees in California account for 48.5 percent of total state employment, greater than the national average.

With San Francisco, San Jose, and Los Angeles all ranking in the top ten cities in the world for venture capitalist investment.

It should come as no surprise that California has the largest number of small enterprises. California accounted for approximately 13.4 percent of the total number of new jobs produced.

The Golden State has about half as many small enterprises as Texas, with the second-highest number of small businesses in the United States, with 4.1 million.

The Kauffman Index generated the top five rankings for business formation in urban areas, the largest 25 states, and the smallest 25 states:

The Top 5 States Of The 25 Largest States

  1. Pennsylvania
  2. Minnesota
  3. Massachusetts
  4. Wisconsin
  5. Colorado

The Top 5 Metropolitan Areas

  1. Washington-Arlington-Alexandria
  2. Pittsburgh
  3. Portland-Vancouver-Hillsboro
  4. Boston-Cambridge-Quincy
  5. SF-Oakland-Fremont

The Top 5 States of the 25 Smallest States

  1. Maine
  2. South Dakota
  3. Montana
  4. Vermont
  5. North Dakota

What Percentage Of Small Businesses Are Owned By Minorities?

According to the most current Kauffman Index, the following races have the highest percentages of small company owners:

For reference, consider how those figures have evolved since 1996:

How Many People Become Unemployed Each Year Due To Exits?

According to the SBA Office of Advocacy an exit occurs when a company goes from one or more workers to none. And stays that way for at least one year. 

Small business departures cost 749,000 jobs in the third quarter of 2016.

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